Thank you very much for joining FY 2022 earnings announcement of Takeda. I will serve as MC, Head of IR. My name is O’Reilly. [Operator Instructions] Before starting, I would like to remind everyone that we will be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those discussed today. The factors that could cause our actual results to differ materially are discussed in our most recent Form 20-F and in other SEC filings. Please also refer to the important notice on Page 2 of the presentation.

Regarding forward-looking statements and our non-IFRS financial measures, which will be discussed during this call, definition of our non-IFRS measures and reconciliations risk comparable IFRS measures are included in the appendix to the presentation. Now let’s move to the presentations.

President and CEO, Christophe Weber; and R&D President, Andy Plump; CFO, Costa Saroukos, will provide you with a presentation, then we will have Q&A session. Let’s start..

Thank you, Chris. Thank you, everyone, for joining us today. It’s a great pleasure to be with you. Fiscal year 2022 has been a very successful year, during which we have been putting our corporate philosophy into action to create long-term business and societal value.

Everything we do is guided by our values, brought to life through action based on patient, trust, reputation and business in that order. This is fundamental to our strategy, our identity and our culture.

We have been steadily executing towards our vision to discover and deliver life-transforming treatments with a commitment to patients, our people and the planet. A good example is how we have chosen to price our recently approved dengue vaccines QDENGA.

We are prioritizing countries with the highest burden of disease and where barriers to access to medicines and vaccines are particularly complex. In line with our cheap pricing strategy, we will adjust QDENGA price according to a country’s economic stage and health system maturity to ensure broader access.

For example, the private market price for QDENGA in Indonesia will be about 1/3 its European price and far lower than other innovative vaccines in Indonesia. With regard to our people in priority, our intention is to create an exceptional inclusive people experience wherever we work.

For our colleagues who can work virtually as well as in our offices, we emphasize effectiveness, flexibility and inclusion with fit for purpose and regular face-to-face interaction and are leveraging data and insight to inform our approach.

We are also committed to delivering a high standard of environmental leadership, and we made important progress toward our greenhouse gas emission goals in fiscal year 2022.

As an example of the multiple initiatives we have underway, in March this year, we officially opened our first positive energy manufacturing support building at our site in Singapore. This building actually produced more electricity than it consumes, and it is the first of its kind in the biopharmaceutical industry in Singapore. In the U.S.

Our virtual power purchase agreement with Enel North America is expected to create up to 350,000 megawatt hours of renewable energies credit per year. That accounts for approximately 20% of Takeda’s current enterprise, Scope 1 and 2 greenhouse gas emission.

We are also doubling down our investment in data, technology and AI with a 10% investment increase in 2022 to improve our productivity across our entire value chain.

In these ways, through our core business, Takeda is creating long-term value for patients, shareholders and society, while making a positive impact on our people, communities and the planet. Turning to Slide 5 to our financial performance.

I am pleased to say that fiscal year 2022 was an excellent year for Takeda as we delivered our exceeded management guidance for revenue and profit growth. On the top line, we booked revenue of more than ¥4 trillion for the first time, representing core growth of 3.5% at a constant exchange rate.

This performance was driven by our growth in lunch product, which increased 19% at a constant exchange rate and now represents 40% of our total revenue. Core operating profit was nearly ¥1.2 trillion, representing growth of 9.1% at a constant exchange rate. And core earnings per share was ¥558 with growth of 13.9% at the constant exchange rate.

I also want to highlight our continued progress in reducing our debt. We have now brought our leverage ratio down to 2.6. This includes the impact of a $3 billion payment we made in Q4 to acquire TAK-279 from Nimbus.

Excluding that, we will have reached 2.3x or the low 2s target we set as 1 of our key financial metrics commitment after the Shire acquisition. This achievement enabled us to pivot to a new phase of investing for growth and shareholder returns.

Moving to the right-hand side of the slide, and our pipeline progress in fiscal year 2022, our dengue vaccine QDENGA received approval in multiple countries, including Indonesia, the European Union, U.K. and Brazil. We have since received additional approvals in Argentina and Thailand and have launched in a number of European and Nordic countries.

The U.S. FDA also accepted QDENGA for priority review, and we are looking forward to a potential approval in the U.S. and to expanding access to these vaccines to other regions later this year. Also this year, we have positive late-stage clinical trial data readout for TAK-755 and fazirsiran.

Based on favorable interim Phase III result, we are on track towards the filing of TAK-755 as a treatment for congenital thrombotic thrombocytopenic purpura, or cTTP, a rare blood clotting disorder with limited therapeutic option. We also announced positive Phase II results for fazirsiran in alpha-1 antitrypsin deficiency associated liver disease.

And this year, we have begun dosing patients in the Phase III studies. Our Orexin franchise is also advancing. We began a Phase IIb study for TAK-861 in narcolepsy type 1 and type 2 and published positive Phase I data for TAK-925 in the post anesthesia setting.

We continue to strengthen our pipeline with external opportunities to complement our innovative internal R&D engine. This included the acquisition of TAK-279 for immune-mediated disease as well as in-licensing agreement for fruquintinib for colorectal cancer and TAK-227 for celiac disease.

We are optimistic about this late-stage programs and the potential of this molecules to bring meaningful advancement for patients. Looking ahead to fiscal year 2023 on Slide 6. We have been communicating for some time that this coming year will be challenging due to the impact from loss of exclusivity, most significantly VYVANSE in the U.S.

and AZILVA in Japan. However, these are temporary headwinds and do not alter the momentum of our growth and launch products nor our excitement in the pipeline to deliver major and long-term growth.

As a result of the strong deleveraging progress I highlighted on the previous slide, we are now entering a new phase for the company in terms of capital allocation. I am pleased to announce a planned dividend increase from ¥180 to ¥188 per share in fiscal year 2023, underscoring our confidence to grow beyond the near-term challenges in fiscal 2023.

With regard to our guidance for the coming year, for revenue, we expect momentum from our growth and launch product to largely offset the impact of generic insurance. However, we do have an additional headwinds from COVID-19 vaccines expectation.

In fiscal year 2022, we actually exceeded our revenue forecast for COVID-19 vaccines in Japan with almost ¥60 billion in sales. But as a result of softening demand and the government cancellation of their order for Nuvaxovid, we now expect fiscal year 2023 revenue to be minimal.

As a result, our management guidance is for core revenue to decline by low single-digit percentage at a constant exchange rate, with COVID-19 vaccines being the main difference from our previously communicated goal of holding revenue flat this year.

With regard to profits, we do expect an impact from losing the high-margin product generic in 2023, but we are doubling down on OpEx discipline to limit the impact as much as possible.

That said, we are not holding back from making the necessary investments to secure future growth, and we’ll continue to invest in R&D and data and technology to secure Takeda long-term competitiveness. Although we expect core operating profit to decline in the low 10 percentile, we are still forecasting an absolute amount of more than ¥1 trillion.

Core EPS is expected to be ¥434. After several years of business transformation, integration and deleveraging, we have built competitive global scale with a strong financial foundation and are confident in our future growth.

This enabled us to pivot our capital allocation policy to place less emphasizes on rapid debt paydown and instead allocate more capital towards growth investments and shareholder returns.

This includes the adoption of a progressive dividend policy which means that going forward, we intend to increase or maintain our dividend every year, reflecting a new chapter for Takeda with a clear focus on investing for growth and shareholder return.

Moving to the right of the slide, our upcoming pipeline milestones also support our confidence in the future. First, we are expecting some significant life cycle management expansion this fiscal year as we now anticipate regulatory decisions in the U.S.

for Entyvio subcutaneous formulation for ulcerative colitis and for HYQVIA and GAMMAGARD LIQUID for CIDP. We also expect the readout for ALOFISEL Phase III ADMIRE study, which we believe will support the U.S. filing of this highly innovative cell therapy for complex perianal fistula.

And as I mentioned, we also anticipate further approval decision for QDENGA, including in the U.S. as well as an approval decision in the U.S. for TAK-755 for cTTP. Lastly, we expect to obtain Phase IIb results for TAK-279 in psoriatic arthritis and initiate a pivotal Phase III program in psoriasis.

Andy will share additional information on these programs later in the presentation. Turning to Slide 7 on our high-level outlook for the near, medium and long term.

Based on our current assumption for fiscal 2023, we expect to return to revenue, profit and margin growth in the near term, driven by continued expansion of our growth and launch product such as ENTYVIO, TAKHZYRO, LIVTENCITY and our plasma-derived therapies. We will also start to see meaningful contribution from QDENGA.

We are also excited about our late-stage pipeline and anticipate significant milestone in ‘23 and onwards, as I have already touched upon.

Following the temporary generic headwinds we faced this year, we have no significant loss of exclusivity exposure until the launch of Entyvio biosimilars, which could be as late as 2032, and therefore, the momentum from our growth and launch products, coupled with new launches from the pipeline will continue to drive growth into the medium term.

Beyond that, we expect our investment in R&D to continue to pay off in the medium and long term with progress in our clinical pipeline. As we look to the future, we remain committed to returning to a core operating profit margin in the low to mid-30s, supported by productivity improvements driven by data, digital and technology.

We will also continue to evaluate asset-specific business development opportunities to further enhance the pipeline and reinforce our growth profile. Finally, as I mentioned, our updated capital allocation policy include our progressive dividend policy of increasing or maintaining our dividend each year.

In closing, fiscal year 2022 was a year of growth and strategy execution. We continue to deliver on our long-term commitment, progress our pipeline and return value to our stakeholders while leading up to our values and bringing life-transforming treatments to patients. With that, I will turn the call over to Andy to update you on our pipeline.

Thank you..

Thank you, very much, Christophe, and hello to everyone on today’s call. If we can go to the next slide, please, Slide 9. We continue to build forward momentum with our innovative pipeline this past year.

I’m very excited to share our progress and highlight major milestones achieved in fiscal year 2022 as well as highlight expected major events in the coming year 2023. As Christophe mentioned, we had multiple pipeline successes this past year. We received several approvals for QDENGA in endemic markets.

We also had approval in Europe and a positive CHMP opinion that could support the approval in 8 additional dengue endemic countries participating in the first-ever EU medicines for all procedure.

The WHO estimates around 4 billion people are at risk of dengue infection globally with an estimated 400 million infections, 500,000 hospitalizations and 25,000 deaths each year and most of these deaths occurring in children. In our 4.5-year TIDES clinical outcomes trial, QDENGA demonstrated an 84% reduction in hospitalizations.

As we work to provide broad access to endemic regions around the world, we now have the potential to significantly reduce the hospitalizations and deaths caused by dengue infection in the decades to come. We also had a number of positive study readouts to further advance our pipeline this year.

And as Christophe mentioned, these include a Phase III readout for TAK-755, a Phase II readout for fazirsiran and proof-of-concept data for our Orexin franchise. These positive studies support important program stage ups. We are on track to file TAK-755 for the treatment of congenital TTP in the U.S. with submissions in other regions to follow.

We initiated a Phase III pivotal trial for fazirsiran. Fazirsiran is an innovative and very promising RNA interference therapy that may stop the buildup of harmful protein aggregates in the liver, which can cause inflammation, fibrosis and ultimately liver failure.

Fazirsiran has the potential to reduce the inflammation and fibrosis and prevent liver failure in patients with alpha-1 antitrypsin deficiency. We also advanced TAK-861 into Phase IIb dose-ranging studies for patients with both narcolepsy type 1 and narcolepsy type 2.

While this has been a strong year for pipeline growth, it has not been without its headwinds. Based on feedback from regulatory agencies, we decided not to pursue approval for LIVTENCITY in first-line CMV infections. We continue to believe there was a net positive benefit shown against the standard of care in the frontline trial.

But after discussions with regulatory agencies have decided to make the trial results available to transplant physicians via publications but not pursue a label supplement. LIVTENCITY remains the only approved therapy for refractory CMV infection and has made meaningful impact to the lives of patients in the post-transplant setting.

In the coming year, we see significant opportunities to further expand our growth and launch products. The potential approval of Entyvio subcu in the U.S. for ulcerative colitis and potential approvals for HYQVIA and GAMMAGARD LIQUID in the U.S. for CIDP. Both represent expansion opportunities for 2 of our largest franchises.

In fiscal year 2022, we also made significant investments to enhance our long-term growth prospects with a number of pipeline-enhancing deals.

These include TAK-279, which I will highlight in more detail later in the presentation; fruquintinib, a highly selective oral potent inhibitor of VEGF receptor 1, 2 and 3 with very strong overall survival data in previously treated metastatic colorectal cancer.

This program has already been filed in the United States, and TAK-227, a potential first-in-class oral celiac disease therapy with strong data in the human gluten challenge study that was recently published in the New England Journal of Medicine. Next slide, please.

Through our disciplined prioritization process, we also made a number of strategic and data-driven decisions to prioritize investments in our most promising programs which further propelled the progression of our pipeline. As a result, we achieved 41 clinical stage ups and 8 approvals from the 4 major regulatory agencies around the world.

We also continue to evolve our strategic focus. As an example of our disciplined decision-making, we discontinued R&D efforts in adeno-associated virus or AAV gene therapy. This decision will allow us to focus even more deeply in areas of cell and gene therapy, we believe we can offer transformative therapies to patients and become industry leaders.

These include our innovative allogeneic NK and gamma delta cell therapy platforms as well as next-generation delivery mechanisms for gene therapy. Next, Slide 11, please. Depicted here are our late-stage development programs.

TAK-755 had strong interim results from our Phase III trial in congenital TTP, a rare disease caused by a deficiency of the protease ADAMTS13. TAK-755, our recombinant ADAMTS13 designed to replace this missing enzyme, showed a 60% reduction in the incidence of thrombocytopenic events versus the standard of care. TAK-755 was also better tolerated.

Treatment-related adverse events were 9% for TAK-755 and 48% for the standard of care. We are on track for our first filing in the U.S. As previously mentioned, we have an exciting late-stage addition to our pipeline in TAK-279, a highly selective oral allosteric TYK2 inhibitor.

We’ll be starting a pivotal development program in psoriasis in fiscal year 2023. Additionally, we will have a Phase IIb readout for psoriatic arthritis this fall and are preparing at risk to start a pivotal development program for these patients in early fiscal year 2024.

In parallel, we will be accelerating the development of TAK-279 Crohn’s disease, ulcerative colitis and systemic lupus erythematosus as well as exploring a broad range of additional indications. So next, Slide 12, please. Now I’d like to remind you why we are so excited about TAK-279.

Firstly, TAK-279 is over 1.4 million-fold selective for TYK2 versus the JAK family receptors, important for a best-in-class TYK2 inhibitor given the known safety concerns associated with the JAK inhibitors.

Secondly, as presented at the American Academy of Dermatology in March, TAK-279 has very strong Phase IIb clinical data in moderate-to-severe plaque psoriasis. 33% of patients taking a 30-milligram pill achieved clear skin or PASI 100 with a once daily administration. In addition to the strong efficacy profile, adverse events were generally low.

The most common adverse events were COVID-19 and acne, and importantly, acne and its related forms resolve while patients continued treatment in all but 1 study participants by week 12.

We are looking forward to advancing TAK-279 into 2 Phase III trials in psoriasis and conducting a head-to-head trial against deucravacitinib based on these promising data. The figure at the bottom of this slide shows a high-level time line of our anticipated clinical milestones over the next 2 years. Next, Slide 13, please.

I’d like to now focus on our promising mid-stage pipeline. We are quite energized by recent developments in our Orexin franchise. Earlier this year, we advanced TAK-861, our oral Orexin program into Phase IIb.

Thanks to our knowledge of the narcolepsy space, experience with orexin agonists and close site engagement, we were able to start Phase IIb studies in both narcolepsy type 1 and narcolepsy type 2 within days of establishing proof-of-concept.

We recently started enrollment in our long-term extension study that will provide valuable insights on both long-term safety as well as efficacy. In addition, we recently presented data for TAK-925, our intravenous orexin agonist at the International Anesthesia Research Society.

There is significant unmet need in post-anesthesia recovery due to respiratory depression caused by anesthetics, leading to complications and admission to the intensive care unit. In our study, healthy volunteers recovering from opioid-induced respiratory depression had significant benefits following TAK-925 administration.

In this trial, we saw the potential of TAK-925 to reverse respiratory depression while maintaining analgesic effect. Thus, having the potential to reduce complications.

TAK-925 is now recruiting in a large Phase II study to explore potential postoperative benefits in patients with obstructive sleep apnea and others at high risk for respiratory complications. We are evaluating accelerated pass-through approval in a variety of surgical settings.

Next, TAK-227 is a potential first-in-class therapy designed to prevent the immune response to gluten in celiac disease and is now the most advanced program in our celiac disease portfolio.

These are the first of many new molecular entities that will emerge from our rich and transformative early to mid-stage pipeline, which we are confident will add to our growing late-stage portfolio. Next slide 14, please, my last slide. 2022 was a strong year for our pipeline.

In addition to the progress already mentioned, we had significant life cycle advances for our marketed growth and launch products.

Based on the progress in 2022, in the coming year, we have the potential approval of ENTYVIO subcutaneous in the United States for ulcerative colitis, the potential approval of HYQVIA as a maintenance therapy for CIDP in the U.S.

and Europe, potentially a large growth driver for plasma-derived therapy and ALOFISEL, our mesenchymal stem cell therapy will have a Phase III readout. If positive, we plan to submit a BLA in the U.S. for complex perianal fistulas this year.

We expect these data to support the concept of cell-mediated closure, which could drive significant growth for ALOFISEL. Overall, we are pleased with how we progress the pipeline in fiscal year 2022 and excited about the strong momentum and meaningful advances we can make in 2023. Thank you, and I will now turn it over to Costa..

investing for growth, deleveraging rapidly and shareholder returns. As we have shown today, we would have reached low 2s net debt to adjusted EBITDA in March 2023 if we exclude the upfront payment to Nimbus for TAK-279.

We are really proud of this deleveraging achievement as it reflects on the excellent work we have been doing day-to-day to grow revenues while maintaining strong OpEx discipline and continuing to invest in our future growth.

We have made great progress in creating a strong financial foundation and precisely because of that progress, we are now able to enter into a new phase.

While focusing on maintaining our solid investment-grade credit ratings, we no longer include deleveraging rapidly as a core pillar of our capital allocation policy, meaning we can pivot more towards investing in growth and shareholder returns.

Investing for growth will continue to consist of strategic investments in internal and external opportunities to enhance the pipeline with the recent numbers and Hutchmed deals as a good example.

We will also continue to invest in maximizing the potential of our marketed portfolio while maintaining our focus on expanding our plasma drive therapies business to reinforce our leading position and maximize our growth potential.

With regards to shareholder returns, we are adopting a progressive dividend policy, which means our intention will be to increase or maintain the dividend each year going forward. The incremental amount may fluctuate each year depending on our cash flow outlook. And for fiscal 2023, we are raising the dividend to ¥188 per share from ¥180 per share.

Share buybacks when appropriate, also remain an option for reinforcing shareholder returns, although we do not anticipate implementing a buyback in the immediate future. To close out today’s presentation, I’d like to revisit the slide Christophe showed you, outlining our long-term commitment to growth and shareholder returns.

While fiscal year 2023 will be a challenging year, the headwinds we face are temporary, and we expect to return to sales, profit and margin growth in the near term.

Our growth and launch products continued to deliver strong momentum, representing 40% of our portfolio and growing at 19% at constant exchange rate in fiscal year 2022, and we expect these products to further expand over the coming years, including our newest launch, QDENGA.

On top of that, we expect further launches from our late-stage pipeline, such as fruquintinib, TAK-755 and soticlestat in the near term and TAK-279 and fazirsiran later in the decade. Once VYVANSE and AZILVA are behind us, we anticipate limited loss of exclusivity exposure until Entyvio biosimilar launch potentially as late as 2032.

And by then, we plan to further build out our pipeline and portfolio through internal R&D efforts as well as asset-specific business development, enabling us to secure a long-term growth into the next decade.

Meanwhile, we will remain focused on cost discipline with data and digital playing a huge role in how we optimize our cost base and increase productivity supporting our return to low to mid-30s core operating profit margins.

We’re extremely confident in the near term as underscored by our dividend increase this year and look forward to delivering growth and shareholder returns over the near, medium and long term. Thank you, and now we’ll open it up for some Q&A..

I would like to take questions from the participants. In this Q&A session, we have Christophe, Andy, Costa and Ramona Sequeira, Global Portfolio Division President; Julie Kim, U.S.

Business Unit President; Milano Furuta, Japan Pharma Business Unit President; Giles Platford, PDT Business Unit President; and Teresa Bitetti, Global Oncology Business Unit President, are also on the panel. [Operator Instructions] So the first question is Yamaguchi-san, Citigroup..

This is Yamaguchi from Citi. I would [Indiscernible] two questions first of all. First question is just a meeting of March ‘24 but -- because March ‘24 is now very clear. Investors are interested in March ‘25 where the VYVANSE [Indiscernible] is getting much smaller, but still there is. So do you see March ‘25 -- sales going to grow, I understand that.

But operating profit is going to come back to growth as well. That’s what you see? That’s the first question. The second question is that Nimbus products, those finding questions.

Even though, it is a great data so far, but do you see there is a need to add one more higher dose like a 45-milligram per day to boost up the efficacy because there is a good balance of efficacy and side effect? That’s the second question..

Thank you, Yamaguchi-san. I think -- so for the first question on the growth outlook for year ending March 2025, I’d like Christophe to answer that. And your question on TAK-279, whether we would do any further dose finding, I’d like to ask Andy to comment on that..

Thank you, Yamaguchi-san. It’s Christophe. So we -- if you look, our growth is very much impacted by VYVANSE, especially because it’s such a big product. We have modelized a very significant decline of VYVANSE starting in August 2023. There will still be an impact on fiscal year ‘24, but much less than ‘23.

But that’s a big parameter, if you like, that we’ll have to monitor moving forward. So we expect to return to growth with a near term because we are not 100% sure about the VYVANSE decline.

If it is as we have forecasted, we will rebounce in ‘24, but if -- for example, the decline of VYVANSE is less in ‘23, more in ‘24, it could have an impact on our return to growth. But for sure, once the VYVANSE is washed out, if you like, our growth and launch product are there as we continue to grow.

We have much less exposure to generic until the introduction of biosimilars of ENTYVIO. So we’ll return to growth in revenue and profit and our margin will start re-expanding, if you like, towards low to mid-30s as it is our goal..

So it’s really up to the VYVANSE sales decline speed, which could be quicker or slower, that’s going to have a legendary impact for next fiscal, which is still unknown.

That’s what you say?.

Yes. Look at our forecast and this is our best assessment at the moment but we’ll have to monitor that because it’s -- VYVANSE is also a controlled substance. So it is more complicated than usual. And that could have a big swing on our 2023 actually numbers but -- as well as ‘24. But at the moment, that’s our best assessment.

If you have more specific questions on VYVANSE, Julie is here, she can answer as well..

Yamaguchi-san, it’s Andy. So on your question with respect to TAK-279 and dose ranging, a couple of comments. The first is that we feel very confident in the dose range that we have and the 30-milligram dose, and we’re not intending to do additional dose ranging at this point in psoriasis.

We feel that with the 30-milligram dose, we have a best-in-class molecule with the best-in-class dose. We do think in other indications based on the genetics of TYK2 biology and based on some of the preclinical studies, we think that there’s a potential that we may need higher exposures and activity in some diseases, for example, IBD.

So we’ll be doing -- we’ll be considering additional dose ranging in other diseases. The biology is quite complex with TYK2, as you know, they’re -- we’re talking about the inhibition of multiple pathways, multiple inflammatory pathways, many of which are actually quite difficult to measure in humans.

And so, we feel with the 30-milligram dose we have outstanding 24-hour coverage to support a best-in-class profile in psoriasis..

Great. Thank you, Yamaguchi-san. Okay, we would like to take the next question. So for the next question, I would like to call on Tony Ren from Macquarie..

Sure. Yes. Thank you for the opportunity to pose this question. And congratulations on a set of very strong results and achieving your deleveraging target, I think, slightly ahead of schedule. So a couple of questions from me. So the first 1 is also on the TYK2 TAK-279 program.

So I just wanted to get some understanding on how many trials you guys are looking to run? I think looking at slide -- I think it’s slide -- just give me 1 second, going back to the slide here. I think if I look at Slide 12, it looks like you guys are proposing 2 trials plus a head-to-head trial against an opponent likely deucravacitinib.

So I just want to understand your thinking on that and perhaps a little bit also on the dose. You guys circled the 30-milligram dose on the Slide 12. So is that the dose you guys are thinking about taking into your Phase III studies? And also, will -- this is probably more of a business question, not a clinical development question.

Will you guys put TAK-279 under the GI business unit? So that’s on TAK-279. And also about your ENTYVIO subcu submission that you guys are handing to the U.S. FDA in April. I recall this application was rejected by the U.S. FDA related to the injection device back in 2019.

So I just want to understand how important do you think this will be possibly delaying biosimilar competition?.

Great. Thank you, Tony. So I think the first question on the study plans, about TAK-279, if Andy could kindly comment on that. And then on the subcutaneous for ENTYVIO, I don’t know if -- perhaps Andy, but then maybe also Julie might want to add some comments on that from the U.S. business perspective as well..

Great. Thanks, Chris, and thanks, Tony. So TAK-279 is hands down, our most heavily resourced program at this point. And we have a project team that -- underneath it has a group that’s focusing in dermatology, in inflammatory disorders and then in exploring additional range of additional disorders.

In terms of the number of studies, it will be quite significant. So firstly, we’ll be running a half dozen Phase I studies this year to support the overall program and registration across multiple indications.

So those -- I know that’s not what you’re asking, but those are critical as we move forward to filing to understand activity in special populations, to understand drug-drug interactions, et cetera, all part of a regulatory package. For psoriasis, we’ll start 2 Phase III studies this year.

We’ll start a head-to-head study around deucravacitinib next year minimally. And then for psoriatic arthritis, as I mentioned, we’re planning at risk for favorable Phase IIb data, so we’re planning for Phase III study to start early next year. We’re also going to be starting Phase IIb studies in Crohn’s disease and ulcerative colitis and lupus.

And our aspirational goal is to have those studies started in this fiscal year or early next year. So it’s a very substantive program.

And by the end of this year, actually, our hope is that we have an ongoing Phase III program, multiple ongoing Phase IIb programs, [Phase I] studies to support registration and then an exploratory package to look beyond those 5 core indications.

I think Julie, I’ll hand -- should I hand it over to you to talk a bit about the business construct for 279 and ENTYVIO?.

The dose of 30 milligrams?.

I’m sorry, I’m sorry. So our intent is to move forward with the 30-milligram dose. Of course, it’s going to require discussions with regulatory agencies before we have a final decision on dose. Sorry about that, Tony..

Yes. And in terms of the way that we’re looking at TAK-279 from a commercial perspective, I’ll share a few comments with you. First, when you look at our launch of LIVTENCITY. LIVTENCITY wasn’t a new therapeutic area for us, and we were able to build a commercial team and launch that product successfully.

And so we’re confident in our ability to build the commercial capabilities to support TAK-279 when it is ready to launch in psoriasis. In addition, we’re also very excited about the opportunity for TAK-279 to expand our presence in IBD beyond ENTYVIO..

And about the 2019 FDA rejection, was that related to the medical device used for injection? And would it be -- would this be critical in delaying biosimilar competition until 2032?.

Yes. So this will not have an impact in terms of delaying biosimilar competition, but in terms of the FDA response in 2019, yes, it was related to the device, and there was no concern about the product itself, and we’re very much looking forward to being able to launch ENTYVIO subcu in the U.S. later this year.

It’s been doing quite well in other geographies, and Ramona can speak to that if needed..

Okay. Great. Actually, I also have a question on fruquintinib, but I’m happy to go back to the queue if there are a lot of people waiting..

Thanks, Tony. Maybe we’ll move on to another question for now. We’ll come back to you later if necessary. Thanks, Tony. Okay. I’d like to take the next question then from JPMorgan, Wakao-san..

This is Wakao from JPMorgan. I have 2 questions. So the first is after 2024, the forecast for the R&D in the 2024, you don’t have much large budget for the R&D. According to the explanation, then TAK-279 is also going to run for the R&D. So then there will be a net growth for the R&D even after 2024.

So then the [OpEx,] then the 30% or to the mid will be the amount of the budget you are considering for the R&D and also the balance of the OP margins? And also, second is regarding the increase of the -- increase of share and the diverging and the increased stock share. And then you indicated this would be good.

But in what occasion are you going to increase the share -- cost of the share? And also if the profit will increase, then are you going to increase the stock price or -- next term or the next -- there’s not that major -- the return of the expense, so the -- according to [concern] from this -- the [current stations,] so from the next year on, are you also going to increase the stock price?.

Thank you, Wakao-san for your questions. So the first question was on the outlook for R&D expenses from fiscal ‘24 and beyond. And then what impact that could have on our margin targets? And then the second question on the criteria for a dividend increase.

So maybe, I’d like Costa to take these questions and then perhaps, Andy, if you have anything to add, you could jump in later..

Sorry, Chris, can you repeat that? You are breaking up? Can you repeat those questions again?.

Yes, certainly. So the first question was on the outlook for R&D expenses from fiscal year ‘24 onwards. Obviously, we have with TAK-279 coming into the pipeline, is that going to need a significant step-up in R&D spend from fiscal 2024? And if so, what impact does that have on our target to return to the low to mid-30s.

And then the second question was on the dividend increase.

What would be the criteria if the dividend increases in the future? Is it linked to profit growth, cash flow, outlook? What are the criteria?.

Great. So Wakao-san, thank you very much for your question. When we communicate the getting back to returning to our low to mid-30s in the near to medium term, that factors in the incremental investment in R&D, and it also follows the moving pipeline as it progresses as well. So in our assumptions, in our financials, it does include that.

And what we’re seeing is very much laser-focused on the other operating expenses, in particular, SG&A. So we’re really doubling down on our focus on finding productivity gains there. So in fact, what you saw in fiscal year ‘22, we did increase R&D, but SG&A was actually declining at a constant exchange rate.

We’re leveraging data, digital, technology throughout the value chain. We’re seeing improvements in manufacturing, in sales and marketing and back-office G&A. So we’ll continue down that path.

And we’ll, again, align to our capital allocation policy, we’re investing for growth and part of that is definitely investing in R&D as the pipeline declares itself.

But at the same time in fiscal year ‘23, we’re doubling down on our focus on R&D, factoring in 279, 861 and other TAK-999 yet the R&D cost is increasing at 4% at a constant exchange rate. So Andy is also managing the budget based on prioritization as well. So that’s really something that we’ll continue to keep an eye on.

With regards to dividend, we’re very much excited about the dividend policy on the capital allocation policy. One reason, as I highlighted, we’ve been able to really deleverage faster than what we expected. So we did get down to low 2x, excluding the TAK-279 Nimbus deal.

Off the back of that, that closes the Shire financial criteria that we had to address. And it really switches the focus, and we pivot more towards investing for growth and shareholder returns. And this dividend policy, which we’ve added is a progressive dividend policy where we increase or maintain each year.

And the determinating factor would be what is determining whether we increase the dividend, there will be some financial metrics that we look at, for example, free cash flow ratio to the dividend and also dividend payout ratios, et cetera.

So we will look at all these ratios and make those decisions at the executive team at the Board each year and communicate that accordingly. Thank you very much..

Well, we would like to move on to the next question. Next is BofA Securities, Mamegano-san.

Mamegano, can you hear me?.

yes, I can. I have 2 questions. One is on PDT. Concerning PDT business, the supply and the manufacturing capacity expansion over 60%, you achieved it with a 1-year acceleration. That’s a great achievement. And in your pipeline, TAK-771 and 881 are also ongoing.

And these assets whether or not they would just further accelerate the expansion of the PDT business? That’s my first question. Second question is about TAK-755. In cTTP, you had a positive result. And currently, I think you are preparing or fighting in the U.S. various iTTP seems to be a little delayed.

If so, what is the reason behind?.

Thank you for the question. So the first question on plasma-derived therapies, achieving 65% capacity a year ahead of plan. So what were the drivers for that? And then also referring to some of the programs we have in development.

So for example, TAK-881 in the pipeline and what the potential impact of these could be in the future? I’d like to ask Giles to answer that question. And then the second question was on TAK-755.

We’ve talked about our submission on track in cTTP, but has there been a delay with the iTTP program? And if you can provide any comments on that, I’d like to ask Andy to comment on that one..

Yes. Thank you very much for the question. This is Giles. We’re very happy to announce that we have achieved the commitment that we made in 2019 to expand our capacity between 18 to 23 by more than 65%.

We have achieved that 1 year early, thanks to continued and consistent investment in capacity expansion both in our plasma sourcing network and across our network of manufacturing sites around the world, combined with improvements in efficiency and productivity, and we are confident that the investments that are ongoing to expand our capacity and further improve efficiency will support the growth both of our on-market portfolio, our near-term launches like HYQVIA in CIDP, which is expected to be approved and launched in the U.S.

and Europe in fiscal ‘23 as well as the launch of our pipeline, including TAK-881, the high concentration facilitated SCIG, which will start Phase III study in fiscal ‘23. Thank you..

And then Mamegano-san, it’s Andy, Andy Plump. Just on your question with respect to 755. So we’re on track for submission in cTTP. The results have been quite extraordinary against the standard of care, both in terms of efficacy and safety, on track to submit in the U.S. and then plans to expand globally.

For [iTTP,] the original proof-of-concept study that we have done was on top of standard of care, which is quite burdensome, the plasma exchange. It was actually difficult to demonstrate significant differences of the combined therapy.

And actually, we’re in the process now of starting a second proof-of-concept study with a very different approach that’s intended to fundamentally change the standard of care where TAK-755 will go up against the standard of care plasma exchange. Plasma exchange is quite burdensome, high volumes, poorly tolerated variable efficacy.

And so TAK-755, very low injection volume, very well tolerated. So we’re quite excited to get that study up and running this year and see the results..

Thank you. Next question from Morgan Stanley, Muraoka-san..

From Morgan Stanley. My name is Muraoka.

Do you hear me?.

Yes..

AAV gene therapy development was discontinued. So let me clarify, gene therapy, cell therapies will continue, but specifically AAV development is discontinued. That’s my understanding. Is that right? And why AAV only is discontinued? Can you explain the background, please? That’s my first question. Second question, PDT, Japan plant to be constructed.

To have a plant in Japan, what’s the advantage? That’s my question. Is that a cost, regulations or any other factors? In Japan to have a plant and what advantage -- I don’t know much in pharma or other industries.

So can you explain that, please?.

Thank you, Muraoka-san. So the first question was on the announcement to discontinue research in AAV gene therapy. So the question is, will we continue to research other gene therapies and cell therapy? And if it’s only AAV that we’re discontinuing, what is the reason for that? I’d like to ask Andy to comment on that question.

And then the second question on our recently announced new plasma-derived therapies facility -- manufacturing facility in Japan. What are the advantages of building that facility in Japan? Is it from a cost basis or a regulatory basis? I’d like to ask Giles to comment on that..

Thanks, Chris, and thanks, Muraoka-san. So firstly, you’re correct. We made the focused decision to discontinue AAV gene therapy, but we’re still very much engaged in cell therapy, in particular, in our plasma -- in our human-derived NK and gamma delta platforms, and we have earlier efforts in nonviral gene therapy.

So the question, why did we decide to discontinue the AAV platform, so 2 comments. The first is we’re always looking at the -- at our portfolio and making prioritization decisions to ensure that we’re investing in the programs that are most likely to emerge and deliver transforming medicines to patients and drive growth for Takeda.

AAV gene therapy has two main challenges. The first is that there are a substantial number of individuals in the population that have neutralizing antibodies to AAV and can never be administered in AAV gene therapy. That’s probably somewhere in between 30% and 50% of the population.

And then secondly, there’s a limited [repertoire] of tissues that you can target AAV to. We actually had made great progress in our platform.

But as we started to move forward as we started to recognize some of the cost structures, which are -- which have grown considerably over the years as we started to experience some of the challenges in the external landscape, the regulatory and payer bars that will -- started to change to what they were when we started this program 4 or 5 years ago.

We came to the conclusion that while there’s still opportunity, our resources are better invested in other platforms..

And with regards to the question on the investment in the end-to-end manufacturing facility in Japan, plasma-derived therapies remain a high unmet need area in Japan, while demand is growing, timely diagnosis and treatment rates with immunoglobulins are currently much lower than other parts of the world.

So regulatory efforts are underway to elevate the standard of care in Japan and introduce more of our global plasma-derived therapies portfolio into Japan through the next decade to improve patient access.

This will be our first global plasma facility in Japan, our biggest ever manufacturing investment in the country and the largest facility of its kind in the country, reflecting our commitment to our long and proud heritage and to Japanese patients.

Investment in a state-of-the-art facility with global processes and capabilities have fully leveraged the latest automation and digitalization technologies, will enable us to better serve the growing market in Japan sustainably, in line with local requirements, to secure local supply as well as to add incremental capacity to our global network.

So we’ll be the only leading company to have both local and global plasma products in Japan. And the only local fractionator to have a global footprint, bringing greater supply resilience domestically and overseas.

I would also say that investment in existing Takeda manufacturing location, where we have multiple operations like Japan enables us to find cost savings, synergies and efficiencies by leveraging adjacent infrastructure, services and relationships..

Thank you very much for the question. Okay. For the next question, we would like to take from TD Cowen, Michael Nedelcovych..

There’s been a recent proliferation of oral agents in development for immunology indications, including IBD and dermatology.

This would seem to be a near midterm risk to drugs in your portfolio like vedolizumab, especially the subcutaneous formulation, but of course, also an opportunity if those markets do shift more toward oral agents from biologics given your own development efforts in that space.

So I’m curious how you think about the competitive landscape across these therapeutic areas over the next, say, 5 years? And where you see Takeda’s participation being most important?.

Thank you, Michael, for that question. Perhaps I’d call on Ramona to answer this question..

Yes, absolutely. It’s Ramona here, Michael. Thanks for the question. And that is something that we’re keeping a close eye on really across our therapy areas. But of course, as you mentioned, in IBD and our autoimmune areas in general. So that was 1 of the drivers behind our acquisition of TAK-279.

But I would say, we have a very, very high bar for efficacy and safety in this space. So if we believe something is oral and can come in and really transform the treatment paradigm, that is where we want to focus. And we believe we have that with TAK-279.

It’s a product that can come in and actually transform the treatment paradigm in psoriasis and the other areas, for instance, IBD, where we’ll be investigating it.

However, if we feel something is going to come in as an oral and just provide more convenience but not really transformative in the treatment paradigm, we are not going to invest and focus there. So we’re looking at assets across the board, and we’re keeping a close eye on things, including the 1 in development for IBD, as you mentioned, oral vedo.

But really, we’d like to see a little bit more data before we determine if that’s really going to meet the bar that we have set for efficacy and for transforming the treatment paradigm. Thank you..

Thank you very much. Okay. I think we probably have time for 1 final question. So I would like to call on Miki Sogi from Bernstein..

I have a couple of questions regarding TAK-279. So on the Page 19, you disclosed a high-level plan for development program. And can I -- first of all, my first question is this -- the head-to-head study, this is superiority study or noninferiority study against deucravacitinib.

And also the duration of study for this head-to-head appear to be a much longer than the other of the Phase III studies that you are planning.

Is this because of the longer [time] duration or because of the size of the -- sample size that require longer enrollments?.

Andy, would you like to comment on that?.

Yes. Sure. Sure, Miki, thank you for the question. So we haven’t finalized the design of the head-to-head study yet, but it’s our intent to run the head-to-head study because we believe that TAK-279 is a superior molecule that we can demonstrate that in a clinical study.

And then secondly, please don’t look at the size of the graphic to -- as an indication of the study time line. Those are just kind of general indicators as to approximate start times for the various studies..

Okay. Thank you for your question. So with that, I’d like to bring today’s conference call to a close. Thank you very much, everybody, for participating today. And if you have any follow-up questions, please reach out to the Investor Relations team. Thank you very much, and have a good evening or good day..